/ 20 May 2024

South Africa rate cuts on hold: What borrowers need to know


Some strategies for financial resilience

South African borrowers hoping for a near-term reduction in interest rates face a setback. The US Federal Reserve’s recent decision to maintain interest rates likely pushes back South Africa’s anticipated rate cuts. While this news might be discouraging, understanding the situation empowers borrowers to navigate the current financial landscape.

Domino effect: US rates and South African borrowing costs

The South African Reserve Bank (SARB) often follows the lead of the US Federal Reserve, particularly regarding interest rates. This is due to the significant influence the US economy holds on global financial markets. With the Fed keeping rates steady, the SARB is less likely to implement cuts in South Africa soon.

This directly impacts South African borrowers. Interest rates are a key determinant of borrowing costs, influencing everything from home loans and car finance to credit card repayments. Higher interest rates translate to increased monthly payments, putting a strain on household budgets.

Double whammy: High rates and tightened lending

South African borrowers face a double challenge. Not only are interest rates at a 15-year high, but banks have also tightened their lending criteria. This means stricter application processes and higher credit score requirements. Individuals with bad credit may find securing loans or accessing favourable interest rates even more difficult.

Feeling the pinch: Impact on borrowers with bad credit

For borrowers with bad credit, the current economic climate can be particularly harsh. Higher interest rates lead to increased borrowing costs, while tighter lending conditions make it harder to qualify for new loans or refinance existing ones. This can trap individuals in a cycle of high-interest debt.

Refinancing for bad credit: Exploring options 

While securing a refinance with bad credit might seem challenging, it’s not entirely impossible. Here are some strategies to consider in the long term:

  • Improve your credit score: Building a good credit history takes time and discipline. However, consistently making on-time payments for existing debts can significantly improve your credit score over time.
  • Consider a co-signer: Having a co-signer with good credit can substantially enhance your loan application. This individual essentially backs the loan repayment, increasing its appeal to lenders and possibly reducing your interest rate.
  • Explore alternative lenders: While traditional banks might be hesitant to lend to borrowers with bad credit, alternative lenders might offer more flexible options. However, comparing rates and terms is crucial before committing to an alternative loan.

Beyond the immediate: Strategies for financial resilience

Even with delayed rate cuts, proactive steps can help you manage your finances effectively.

  • Review your budget: Scrutinise your spending habits and identify areas where you can cut back. This will free up resources to allocate towards debt repayment.
  • Prioritise high-interest debt: Focus on paying down debts with the highest interest rates first. This will save you money in the long run.
  • Negotiate with creditors: If you’re struggling to make repayments, reach out to your creditors and discuss potential solutions. They might be willing to offer a more manageable payment plan.


The delay in interest rate cuts poses challenges for South African borrowers, especially those with bad credit. However, understanding the current economic landscape and employing strategic financial planning makes it possible to navigate this situation and build financial resilience. Remember, building a strong credit history and exploring alternative financing options can open doors in the future.